Commissioner of State Revenue v Liquid Rock Constructions Pty Ltd
[2012] VSC 329
•7 August 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
No. 6776 of 2011
| COMMISSIONER OF STATE REVENUE | Plaintiff |
| v | |
| LIQUID ROCK CONSTRUCTIONS PTY LTD | Defendant |
---
JUDGE: | Pagone J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2, 16 April, 23 July 2012 | |
DATE OF JUDGMENT: | 7 August 2012 | |
CASE MAY BE CITED AS: | CSR v Liquid Rock Constructions Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 329 | |
---
APPEAL – Leave to appeal from VCAT — Identification of a question of law — Victorian Civil and Administrative Tribunal Act 1998 (Vic) s 148.
PAY-ROLL TAX –Whether the phrase ‘perform duties’ requires an employee or employee-like relationship between the shared employee and both employers - Pay-roll Tax Act 2007 (Vic) s 71(3).
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Solomon S.C. with Mr C Young | Solicitor for Commissioner of State Revenue |
| For the Defendant | Mr C Furnell | Lachlan Partners |
HIS HONOUR:
The Commissioner of State Revenue (“the Commissioner”) seeks leave to appeal, and if leave be granted to appeal, under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) from the orders of the Tribunal made on 15 November 2011. An appeal from a decision of the Tribunal under s 148 may be brought only on a question of law and only with leave.
The Commissioner’s proposed Notice of Appeal described two questions as questions of law upon which the leave was sought:
(i)Whether, as used in s 71(3) of the Payroll Tax Act 2007 (Vic), the phrase “perform duties” has a technical meaning?
(ii)Whether, as used in s 71(3) of the Payroll Tax Act 2007 (Vic), the phrase “perform duties” requires that there must be an employee or an employee-like relationship between the shared employee and both employers?
The first of these questions might more accurately have been formulated as whether the phrase was used in the section with its ordinary meaning as distinct from a legal meaning. The Commissioner contended that the phrase was to be understood in its ordinary meaning as did the defendant and also the Tribunal. There was no suggestion of the Tribunal adopting any meaning of the phrase other than its ordinary meaning unless it did so in the context of the issues raised by the second question. Indeed, the Tribunal purported to apply the decision in Commissioner of Stamps v Garrett Hunter Pty Ltd[1] where Doyle CJ adopted the ordinary meaning of a comparable provision.[2] Leave to appeal under s 148(1) requires, amongst other things, that the applicant show that the legal question formulated is relevant to the granting of the relief sought on appeal.[3] The Commissioner has not done so in this application in respect of question one. Accordingly, I do not grant leave in respect of that question.
[1](1997) 69 SASR 275.
[2]Ibid 283; Liquid Rock Constructions Pty Ltd vCommissioner of State Revenue (Taxation) [2011] VCAT 2164, [55].
[3]Secretary to theDepartment of Premier vHulls [1999] 3 VR 331, 335 [9], 337 [16] (Phillips JA).
The second question more actively engages the decision of the Tribunal and captures the dispute between the parties. The Commissioner assessed four companies as a group under the Payroll Tax Act 1971 (Vic) on the basis which included the inter use of employees necessary to engage s 71(3). The defendant objected that s 71(3) did not apply (although it seems that the reference in the Notice of Objection to s 71(2) was a typographical error and was intended to refer to s 71(3)) and the Commissioner disallowed the objection on the basis which included the application of s 71(3).
The Tribunal decided that s 71(3) did not apply on the basis of the facts before it and its understanding of the meaning of the section. The Commissioner contended that the Tribunal’s decision on that issue revealed the error of law described in the second question. The Commissioner’s contention was that the Tribunal had construed s 71(3) as requiring “a legal relationship” between a Ms Asvestas and Liquid Rock Formwork Pty Ltd (“LRF”). The Commissioner’s written submissions filed in the proceeding in this court contended:
To speak of an “employee relationship” is to speak of a legal relationship. Whether or not it exists is a question of law. And that reveals the error. In addressing a phrase on its ordinary meaning, the Tribunal posed a legal question. By doing so, it erroneously gave the phrase something other than its ordinary meaning. The search for an “employee-like relationship” is more troublesome, but presumably can only be a search for a relationship that bears some, but not all of the elements of an employer-employee relationship. Those elements are (1) the employer’s power of selection of his or her worker; (2) the payment of wages or other remuneration; (3) the employer’s right to control the method of doing the work; and (4) the employer’s right of suspension or dismissal. Each element involves identification of some legal power, obligation or right. (footnotes omitted).
Senior counsel for the Commissioner contended to similar effect in oral argument that “injecting into the inquiry a question asking as to the legal relationship bespeaks error”.
What an applicant for leave must establish on an application for leave to appeal has been considered in many cases.[4] The legal error said to have been made is one of the matters to take into account and the Commissioner relied primarily upon the contention of legal error in seeking leave to appeal. In Secretary to the Department of Premier v Hulls[5] Phillips JA said that something less than error must be established for the grant of leave but that what must be shown is “that there is a real and significant argument to be put that error exists”.[6] Later, his Honour said:
The applicant must show that there is a real or significant argument to be put on that question of law at least to this extent: that there is sufficient doubt about it to justify the grant of leave. Moreover, it may have to be shown that to allow the error to go uncorrected would impose substantial injustice, although, where the order below is final, that injustice will often be more readily discernible.[7]
The defendant contended that no error by the Tribunal was demonstrated by the Commissioner to satisfy that test.
[4]Ibid; Commissioner of State Revenue v STIC Australia Pty Ltd [2010] VSC 608, [10] (Davies J); Al-Hakim v Monash University (Unreported, Victorian Supreme Court of Appeal, 28 March 2003); Myers v Medical Practitioners Board of Victoria [2007] VSCA 163; Morris v R (1987) 163 CLR 454, 475 (Dawson J); Osland v Secretary to the Department of Justice (2010) 241 CLR 320, [21] (French CJ, Gummow and Bell JJ).
[5][1999] 3 VR 331.
[6]Ibid 335 [10].
[7]Ibid 337 [16].
The Commissioner’s contention of error depended largely upon the concluding part of a sentence dealing with the general operation of s 71 in which the Tribunal said:
65.I am fortified in that conclusion by reference to the heading to Section 71 of the 2007 Act ‘Groups arising from the use of common employees’. Under Section 36(2A) of the Interpretation of Legislation Act 1984 this heading forms part of the 2007 Act. It reinforces the view that for the relevant sub-section to operate there must be either an employee or an employee-like relationship between the shared employee and both employers.[8] (my emphasis)
The reference in this passage to “an employee or an employee-like relationship” needs to be understood in the context of the Tribunal’s decision as a whole and, in particular, by reference to the application by the Tribunal of the analysis by Doyle CJ in Hunter, as well as the conclusions reached by the Tribunal on the facts upon the evidence which had been adduced.
[8][2011] VCAT 2164, [65].
The application of s 71 can be difficult because its terms are apt to cover more than the policy of the legislation would suggest. The mere provision of a service to someone by a person employed by another who is otherwise wholly independent, could come within the literal application of the section although that could not be thought to be the purpose, intention or reach of the provision. It is, perhaps, for that reason that the facts must be carefully scrutinised when the provision is in issue. The words in the section must be given their ordinary meaning without limitation by reference to an implied exclusion not found in the statute. The facts, however, must fairly engage the section and must be evaluated carefully to ensure that they fall within the words of the enactment. A person may appear to be performing duties for someone other than the employer when careful analysis will show that not to be the case. It is commonplace for an employee to discharge duties for an employer by provision of duties to another as provision by the employer rather than for or in connection with the business of the other.[9] In Hunter Doyle CJ said that there was “an element of impression”[10] when determining whether a person was providing duties for or in connection with the business of another as distinct from performing duties for an employer by which the employer provides its services to the other.[11] In that case Doyle CJ concluded that the employee (a secretary) of an employer (Meldrick) came within the contemplation of provisions equivalent to s 71 because the secretary employed by her employer (Meldrick) was under the general direction of the person receiving the benefits of her tasks (Vercoe).
[9]Attorney-General for New South Wales v Perpetual Trustee Company (Limited) (1952) 85 CLR 237, 300 (Kitto J).
[10](1997) 69 SASR 275, 283.
[11]Ibid.
It was with that analysis that the Tribunal turned to consider, not the legal relationship between the relevant employee (Ms Asvestas) and the recipient of her services (LRF), but (contrary to the Commissioner’s submission) to the practical basis upon which the services were factually performed and, in that context, to the power on the part of the recipient of the services (LRF) to direct Ms Asvestas as to the manner of the performance of the duties. In that context the Tribunal concluded:
62.In my view someone in Ms Asvestas’ situation will be regarded as supplying services to LRF in the circumstances described in the evidence. She would not be regarded as performing duties for or in connection with its business unless there is at least some power on the part of LRF to direct her as to the manner of the performance of those alleged duties. The evidence in this case was that it was entirely at the discretion of LRC and its controllers Mr De Spirito and Mr Malone as to whether the particular work would be done and exactly how it would be done, that is, whether immediately, some hours later this afternoon or perhaps only next week. It would be going too far I think to suggest that the relevant paragraph requires a relationship of such a nature that one could regard Ms Asvestas as being not only an employee of LRC but also LRF before the paragraph could operate; but I am clear that the present situation falls outside what is contemplated by the paragraph and stands in contrast with the situation described by Doyle CJ in Hunter’s case which was found to fall on the other side of the line.[12]
The “power” to direct, referred to by the Tribunal, was not a legal power flowing from a legal relationship akin to employment but the practical ability of direction in the performance of the tasks based on the evidence in that particular case. The subsequent reference in paragraph 65 of the Tribunal’s decision of an “employee-like relationship” is therefore properly understood as the Tribunal’s conclusion that the task required by the section involves an inquiry into factual behaviour indicating that the shared “employee” was performing tasks in a way and manner like that expected of an employee albeit that there was no employee relationship. The Tribunal’s finding upon that analysis might not have been what the Commissioner had sought, but any error did not arise from an erroneous inquiry flowing from an erroneous construction of the provision but, at best, from an erroneous factual conclusion based upon the evidence. Accordingly, I do not consider the Commissioner to have shown a sufficient case of arguable error (as distinct, perhaps, from factual error)[13] to warrant either the grant of leave or, if leave had been granted, for the appeal to succeed.
[12][2011] VCAT 2164, [62].
[13]See Commissioner of State Revenue v STIC Australia Pty Ltd [2010] VSC 608, [10] (Davies J).
It is therefore not strictly necessary for me to consider whether the Commissioner would otherwise have established the other requirements for leave to be granted but, it may be desirable for me to say something about those additional matters. In Commissioner of State Revenue v Frost[14] I expressed the position by saying:
The requirement for leave under s 148(1) of the VCAT Act “is a safeguard that the appeal is on a pure question of law and that the grounds supporting the question of law articulated for determination by the Court do found the subject matter of the appeal”. It also confers a discretion about whether to grant leave which an applicant must persuade the Court to exercise in its favour. What must be shown will depend upon the particular case bearing in mind the statutory criteria being a grant of leave and not special leave. It will ordinarily be necessary (in addition to a clearly articulated question of law) for an applicant to make out a prima facie case and in an appropriate case it may be necessary for the applicant to show that the question upon which leave is sought has public or general importance.[15]
The material relied upon by the Commissioner in this case to establish public importance is far from persuasive. The proper construction of a statute can be taken to be of some public importance but its importance as legislation with general effect may not be sufficient to warrant leave to appeal where, for example, the question raised on the particular facts of a particular case may not be of a kind that is likely to enliven a wider application of the provision than to the parties of a case upon their particular facts. An affidavit filed by the Commissioner in support of the importance of leave did little more than identify the significance of s 71(3) in general terms and of the existence of similar provisions in the various jurisdictions in Australia. It did little to establish the particular significance of the appeal in the particular case more broadly than to the parties in this case. The affidavit concluded with the contention that whether the phrase “performs duties” is to be construed in its ordinary and natural meaning is an issue which will have nationwide significance, but that question was already determined in Hunter and in my view is not enlivened as a question in this appeal beyond the issues raised by the second question which, in turn, depended upon its particular facts.
[14][2011] VSC 232.
[15]Ibid [3] (citations omitted).
An additional issue arose during the course of the hearing upon which I required further submissions but which on the view I have taken of the application I need not consider. However, it may be desirable for me to identify that issue in broad terms and to express some views on the issue in summary form. The issue concerned the potential application of s 109 of the Taxation Administration Act 1997 (Vic) which provides:
On a review or an appeal—
(a) the taxpayer's case is limited to the grounds of the objection; and
(b) the Commissioner's case is limited to the grounds on which the objection was disallowed—
unless the Tribunal or Court otherwise orders.
In this case a question arose in argument about whether the court lacked jurisdiction to deal with the s 71(3) issue if it had not been raised either by the taxpayer in its grounds of objection or by the Commissioner in the disallowance of the objection, unless there had been an order by the Tribunal permitting the point to be raised. Neither party before me sought to contend that s 109 prevented the point being raised in the application to this court. In those circumstances it is not desirable to delve into the proper construction of s 109 and, in particular, into whether its operation should be seen as potentially affecting jurisdiction. It is sufficient to note that the Commissioner did rely upon s 71(3) in his disallowance of the defendant’s objection.
Accordingly, the application for leave to appeal will be dismissed subject to argument about costs.
4
2
0